EX-99.3 6 v078256_ex99-3.htm
Wonder Auto Technology, Inc.

Pro Forma Condensed
Combined Financial Statements
March 31, 2007 (unaudited)
(Stated in US dollars)
 
 
 
 
 
Wonder Auto Technology, Inc.
Pro Forma Condensed Combined Financial Statements


Index to Pro Forma Condensed Combined Financial Statements


   
Pages
  
       
Introduction to Unaudited Pro Forma Condensed Combined Financial Statements
    
1
  
         
Unaudited Pro Forma Condensed Combined Balance Sheet
    
2 - 3
  
         
Unaudited Pro Forma Condensed Combined Statements of Operations
    
4 - 5
  
         
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
    
6 - 7
  

 
 
 

Wonder Auto Technology, Inc.
March 31, 2007


Introduction to Unaudited Pro Forma Condensed Combined Financial Statements


The following unaudited pro forma condensed combined financial statements have been prepared to give effect to the combination of the Wonder Auto Technology, Inc. (the “Company”) and Jinzhou Wanyou Mechanical Parts Co., Ltd. (“Wanyou”). The unaudited pro forma condensed combined financial statements were prepared using the historical consolidated financial statements of the Company and historical financial statements of Wanyou. Please note that the unaudited pro forma condensed combined financial statements should be read in conjunction with the historical financial statements of the Company and Wanyou, respectively. The Company’s financial information can be found in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 and quarterly report on Form 10-Q for the three months ended March 31, 2007. [The financial information of Wanyou are filed together with this Pro Forma Condensed Combined Financial Statements on 8-K.]

The unaudited pro forma condensed combined balance sheet as of March 31, 2007 combines the unaudited condensed consolidated balance sheet of the Company as of March 31, 2007 and the unaudited balance sheet of Wanyou as of March 31, 2007 and gives effect to the acquisition as if the acquisition occurred on March 31, 2007.

The unaudited pro forma condensed combined statements of operations for the year ended December 31, 2006 and for the three months ended March 31, 2007 give effect to the acquisition as if the acquisition occurred on January 1, 2006, the first day of the Company’s fiscal year. The unaduited pro forma condensed combined statement of operations for the year ended December 31, 2006 combines the audited consolidated statement of operations of the Company for the year ended December 31, 2006 with the audited statement of operations of Wanyou for the period from September 21, 2006 (date of incorporation) to December 31, 2006. The unaduited pro forma combined statement of operations for the three months ended March 31, 2007 combines the unaudited consolidated statement of operations of the Company for the three months ended March 31, 2007 with the unaudited statement of operations of Wanyou for the three months ended March 31, 2007.

The unaudited pro forma adjustments are based upon available information and certain assumptions that we believe are reasonable under the circumstances.

 
-1-
 
 
Wonder Auto Technology, Inc.
Pro Forma Condensed Combined Balance Sheet
As of March 31, 2007 (Unaudited)
(Stated in US Dollars)


   
The Company
  
Wanyou
          
   
March 31,
  
March 31,
  
Pro Forma
  
Pro Forma
  
   
2007
  
2007
  
Adjustments
  
Combined
  
ASSETS
                  
Current assets
                  
Cash and cash equivalents
  
$
6,065,302
  
$
273,515
  
$
-
  
$
6,338,817
  
Restricted cash
    
3,919,971
    
-
    
-
    
3,919,971
  
Trade receivables, net
    
26,042,474
    
562,107
    
-
    
26,604,581
  
Bills receivable
    
8,100,371
    
64,592
    
-
    
8,164,963
  
Other receivables, prepayments and deposits
    
1,445,086
    
192,696
    
-
    
1,637,782
  
Inventories
   
15,535,997
    
224,421
    
-
    
15,760,418
  
Amounts due from shareholders
    
-
    
694,267
    
(100,136
)(a)
  
594,131
  
Amount due from a related company
    
70,249
    
-
    
-
    
70,249
  
Deferred taxes
    
217,693
    
-
    
-
    
217,693
  
                           
Total current assets
    
61,397,143
    
2,011,598
    
(100,136
)
  
63,308,605
  
Intangible assets
                          
Know-how
    
1,482,617
    
-
    
-
    
1,482,617
  
Trademarks and patents
    
11,182
    
-
    
-
    
11,182
  
Customer contracts
    
-
    
-
    
49,053
  (d)  
49,053
  
Property, plant and equipment, net
    
14,469,688
    
1,069,720
    
-
    
15,539,408
  
Land use right
    
1,202,302
    
-
    
-
    
1,202,302
  
Deposit for acquisition of property,
                          
plant and equipment
    
2,864,978
    
18,990
    
-
    
2,883,968
  
Investment in an unconsolidated affiliate
   
567,130
    
-
    
(567,130
)(b)
  
-
  
Goodwill
   
3,115,227
    
-
    
4,949,392
  (d)  
8,064,619
  
Deferred tax
    
221,744
    
-
    
-
    
221,744
  
                           
TOTAL ASSETS
  
$
85,332,011
  
$
3,100,308
  
$
4,331,179
  
$
92,763,498
  
 
 
-2-
 
 
Wonder Auto Technology, Inc.
Pro Forma Condensed Combined Balance Sheet
As of March 31, 2007 (Unaudited)
(Stated in US Dollars)


   
The Company
  
Wanyou
          
   
March 31,
  
March 31,
  
Pro Forma
  
Pro Forma
  
   
2007
  
2007
  
Adjustments
  
Combined
  
LIABILITIES AND STOCKHOLDERS’ EQUITY
                  
                   
LIABILITIES
                  
Current liabilities
                  
Trade payables
  
$
12,411,172
  
$
306,116
  
$
-
  
$
12,717,288
  
Bills payable
    
6,717,565
    
-
    
-
    
6,717,565
  
Other payables and accrued expenses
    
2,833,675
    
15,507
    
-
    
2,849,182
  
Provision for warranty
    
980,551
    
-
    
-
    
980,551
  
Income tax payable
    
446,084
    
-
    
-
    
446,084
  
Amount due to an unconsolidated affiliate
    
100,136
    
-
    
(100,136
)(a)
  
-
  
Dividend payable to minority stockholders
    
691,152
    
-
    
-
    
691,152
  
Dividend payable to Winning
    
343,934
    
-
    
-
    
343,934
  
Payable for acquisition of Wanyou
    
-
    
-
    
7,210,000
  (d)  
7,210,000
  
Secured short-term bank loans
    
6,459,198
    
-
    
-
    
6,459,198
  
                           
Total current liabilities
    
30,983,467
    
321,623
    
7,109,864
    
38,414,954
  
                           
Secured long-term bank loans
    
10,916,984
    
-
    
-
    
10,916,984
  
                           
TOTAL LIABILITIES
    
41,900,451
    
321,623
    
7,109,864
    
49,331,938
  
                           
COMMITMENTS AND CONTINGENCIES
                          
                           
MINORITY INTERESTS
    
2,124,794
    
-
          
2,124,794
  
                           
STOCKHOLDERS’ EQUITY
                          
Preferred stock: par value $0.0001 per share;
                         
Authorized 10,000,000 shares, none
                          
issued and outstanding
                          
                           
Common stock: par value $0.0001 per share;
                         
authorized 90,000,000 shares, issued and
               
(500,000
)(b)
      
outstanding 23,959,994 shares in 2007
   
2,396
    
2,450,000
    
(1,950,000
)(d)
  
2,396
  
Additional paid-in capital
    
22,140,143
    
-
          
22,140,143
  
Statutory and other reserves
    
3,148,265
    
10,919
    
(10,919
)(d)
  
3,148,265
  
                 
(10,811
)(b)
      
Accumulated other comprehensive income
    
1,819,467
    
53,034
    
(42,223
)(d)
  
1,819,467
  
                 
(56,319
)(b)
      
Retained earnings
    
14,196,495
    
264,732
    
(208,413
)(d)
  
14,196,495
  
                           
TOTAL STOCKHOLDERS’ EQUITY
    
41,306,766
    
2,778,685
    
(2,778,685
)
  
41,306,766
  
                           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  
$
85,332,011
  
$
3,100,308
  
$
4,331,179
  
$
92,763,498
  
 
 
-3-
 

Wonder Auto Technology, Inc.
Pro Forma Condensed Combined Statement of Operations
Year ended December 31, 2006 (Unaudited)
(Stated in US Dollars)


       
Wanyou
          
       
For the period
          
       
from September
          
       
21, 2006 (date of
          
   
The Company
  
incorporation) to
          
   
December 31,
  
December 31,
  
Pro Forma
  
Pro Forma
  
   
2006
  
2006
  
Adjustments
  
Combined
  
                   
Net sales
  
$
72,150,483
  
$
731,399
  
$
(31,795
)(c)
$
72,850,087
  
Cost of sales
    
(57,831,251
)
  
(567,365
)
  
31,795
  (c)  
(58,366,821
)
                           
Gross profit
    
14,319,232
    
164,034
    
-
    
14,483,266
  
                           
Operating expenses
                          
Administrative expenses
    
1,907,816
    
16,593
    
-
    
1,924,409
  
Research and development costs
    
458,652
    
-
    
-
    
458,652
  
Selling expenses
    
2,147,854
    
-
    
-
    
2,147,854
  
                           
     
4,514,322
    
16,593
    
-
    
4,530,915
  
                           
Income before the following items and taxes
    
9,804,910
    
147,441
    
-
    
9,952,351
  
Interest income
    
96,810
    
1,593
    
-
    
98,403
  
Other income
    
356,590
    
-
    
-
    
356,590
  
Finance costs
   
(1,033,551
)
  
(610
)
  
-
    
(1,034,161
)
Equity in net income of unconsolidated
                          
affiliates
   
371,005
    
-
    
(22,172
)(b)
  
348,833
  
                           
Income before income taxes
    
9,595,764
    
148,424
    
(22,172
)
  
9,722,016
  
Income taxes
    
(1,270,391
)
  
(40,078
)
  
-
    
(1,310,469
)
Minority interests
    
(101,827
)
  
-
    
-
    
(101,827
)
                           
Net income
  
$
8,223,546
  
$
108,346
  
$
(22,172
)
$
8,309,720
  
                           
Earnings per share: basic and diluted
 
$
0.40
    
-
        
$
0.40
  
                           
Weighted average number of shares
                          
outstanding:
                          
basic and diluted
    
20,787,279
    
-
          
20,787,279
  
 
 
-4-
 
 
Wonder Auto Technology, Inc.
Pro Forma Condensed Combined Statement of Operations
Three months ended March 31, 2007 (Unaudited)
(Stated in US Dollars)


   
The Company
  
Wanyou
          
   
Three months
  
Three months
         
   
ended March 31,
  
ended March 31,
  
Pro Forma
  
Pro Forma
  
   
2007
  
2007
  
Adjustments
  
Combined
  
                   
Net sales
  
$
21,566,796
  
$
921,368
  
$
(85,251
)(c)
$
22,402,913
  
Cost of sales
    
(16,251,790
)
  
(742,104
)
  
85,251
  (c)  
(16,908,643
)
                           
Gross profit
    
5,315,006
    
179,264
    
-
    
5,494,270
  
                           
Operating expenses
                          
Administrative expenses
    
666,566
    
16,330
    
-
    
682,896
  
Research and development costs
    
263,446
    
-
    
-
    
263,446
  
Selling expenses
    
651,616
    
147
    
-
    
651,763
  
                           
Total operating expenses
    
1,581,628
    
16,477
    
-
    
1,598,105
  
                           
Income from operations
    
3,733,378
    
162,787
    
-
    
3,896,165
  
Interest income
    
16,709
    
1,014
    
-
    
17,723
  
Other income
    
23,795
    
3,630
    
-
    
27,425
  
Finance costs
    
(419,392
)
  
(126
)
  
-
    
(419,518
)
Equity in net income of an unconsolidated
                          
affiliate
    
34,147
    
-
    
(34,147
)(b)
  
-
  
                           
Income before income taxes
    
3,388,637
    
167,305
    
(34,147
)
  
3,521,795
  
Income taxes
   
(466,814
)
  
-
    
-
    
(466,814
)
Minority interests
    
(209,371
)
  
-
    
-
    
(209,371
)
                           
Net income
  
$
2,712,452
  
$
167,305
  
$
(34,147
)
$
2,845,610
  
                           
Earnings per share: basic and diluted
  
$
0.11
    
-
        
$
0.12
  
                           
Weighted average number of shares outstanding:
                          
basic and diluted
    
23,959,994
    
-
          
23,959,994
  
 
 
-5-
 
 
Wonder Auto Technology, Inc.
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
(Stated in US Dollars)


1. Basis of presentation

On April 2, 2007, the Company’s subsidiaries Wonder Auto Limited (“Wonder”) and Jinzhou Halla Electrical Equipment Co., Ltd (“Jinzhou Halla”), acquired an aggregate 79.59% equity interest in Wanyou at total consideration of $16.4s million including contingent consideration of $9.21 million through two separately negotiated equity purchase transactions with two former equity owner of Wanyou. The contingent consideration will be payable if Wanyou achieves certain minimum net income threshold in future. After completion of these two equity purchase transactions, Wanyou become a wholly-owned subsidiary of the Company.

The unaudited pro forma condensed combined balance sheet gives effect to the acquisition of Wanyou as if it had occurred on March 31, 2007. The Company’s condensed consolidated balance sheet information was derived from its three months ended March 31, 2007 condensed consolidated balance sheet included in its quarterly report on Form 10-Q for the three months ended March 31, 2007.

The unaudited pro forma condensed combined statements of operations give effect to the acquisition of Wanyou as if it had occurred on January 1, 2006, the first day of the Company’s fiscal year. The Company’s consolidated statement of operations and condensed consolidated statement of operations information was derived from its fiscal year ended December 31, 2006 consolidated statement of operations and for the three months ended March 31, 2007 condensed consolidated statement of operations included in its annual report on Form 10-K for the year ended December 31, 2006 and quarterly report on Form 10-Q for the three months ended March 31, 2007 respectively.

The acquisition was accounted for using the purchase method of accounting in accordance with Statement of Financial Accounting Standards No.141, Business Combinations. Under the purchase method of accounting, the total purchase price is allocated to the net tangible and intangible assets of the business acquired in connection with the Share Purchase Agreement, based on the estimated fair value as of the completion of acquisition. Management has estimated the fair value of assets acquired and liabilities assumed based on the fair value attributable to the actual net tangible and intangible assets and liabilities of Wanyou that existed as of the date of the completion of the acquisition.
 
 
-6-
 
 
Wonder Auto Technology, Inc.
Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)
(Stated in US Dollars)


2. Purchase price allocation

Under the purchase method of accounting, the initial purchase price is allocated to the acquired net assets based on their estimated fair values as of the completion of the acquisition. Based on management estimates of the attributable share (i.e. 79.59%) of fair values of assets and liabilities of Wanyou, the initial purchase price allocation is as follows:

Assets acquired:
      
Current assets
  
$
1,601,031
  
Property, plant and equipment
    
851,390
  
Deposit for acquisition of property,
        
plant and equipment
    
15,114
  
Intangible assets
        
Customer contracts
        
(Estimated life : 1 year)
    
49,053
  
         
Liabilities assumed:
        
Current liabilities
    
(255,980
)
         
Net assets acquired
    
2,260,608
  
Goodwill
    
4,949,392
  
         
Initial purchase price of acquisition
  
$
7,210,000
  

The above initial purchase price for Wanyou does not include the $9.21 million of contingent consideration pursuant to the Share Purchase Agreement. The remaining consideration shall be payable upon Wanyou’s fulfillment of targeted net profit. The recognition and allocation of contingent consideration will be treated as additional purchase price and allocated to goodwill subsequently.


3. Unaudited pro forma adjustments

The pro forma adjustments included in the unaudited pro forma condensed combined financial statements are as follows:
 
(a)
Represents adjustment to eliminate amounts due from/(to) shareholders
 
(b)
Represents adjustment to eliminate equity-pickup of Wanyou.
 
(c)
Represents adjustment to eliminate sales and purchases with Wanyou.
 
(d)
Represents adjustment to record the estimated goodwill resulting from the allocation of the purchase price to the fair value of assets acquired and liabilities assumed.
 
 
-7-